Regulation

Indonesia Issues More Warnings About Cryptocurrencies

In its second such warning in recent weeks, Indonesia’s central bank cautioned investors about buying and selling cryptocurrencies because of the risks associated with it.

According to a report in Reuters, Indonesia’s central bank not only warned about the risks of monetary loss for citizens who invest in cryptocurrencies, but it also said digital currencies are a potential threat to the stability of the entire country’s financial system. The report noted that previously, the Bank of Indonesia stated that cryptocurrencies were not considered legal currency and couldn’t be used as a payment method in the country.

“The ownership of virtual currencies is high risk and prone to speculation because there is no authority who takes responsibility, there is no official administrator and there is no underlying asset to be the basis for the price,” BI spokesman Agusman said in a statement late last week.

The spokesman argued that cryptocurrencies could also be used by criminals who are engaging in money laundering and terrorism. “(Cryptocurrency) is not a legal medium of exchange. We remind (people of) its risks. When the risks occur, the losses will be borne by the public. We are obliged to protect consumers and protect them from a bubble,” Agusman said in a subsequent phone interview with Reuters.

When Reuters asked Agusman if such statements could create panic among Indonesians who had already invested in cryptocurrency, the government spokesman said, “they didn’t consult with us when buying … please help us make the people understand.”

In December, Indonesia’s central bank instituted a regulation that bans financial technology companies involved in payment systems from using cryptocurrencies. It is also looking into whether it needs to regulate trading on cryptocurrency exchanges. The report noted that South Korea is also taking a hardline stance on digital currencies; the country’s justice minister, Park Sang-ki, said regulators were creating legislation that would stop trading of cryptocurrencies. The government has since backed off those comments.

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